Meaning of intermediary E+W+S

5.—(1) In these Regulations “intermediary" means any person, including a partnership or unincorporated association of which the worker is a member–

(a) whose relationship with the worker in any tax year satisfies the conditions specified in paragraph (2), (6), (7) or (8), and

(b) from whom the worker, or an associate of the worker–

(i) receives, directly or indirectly, in that year a payment or benefit that is not chargeable to tax [F1 as employment income under ITEPA 2003], or

(ii) is entitled to receive, or in any circumstances would be entitled to receive, directly or indirectly, in that year any such payment or benefit.

(2) Where the intermediary is a company the conditions are that–

(a) the intermediary is not an associated company of the client, within the meaning of section 416 of the Taxes Act M1 , by reason of the intermediary and the client both being under the control of the worker, or under the control of the worker and another person; and

(b) either–

(i) the worker has a material interest in the intermediary, or

(ii) the payment or benefit is received or receivable by the worker directly from the intermediary, and can reasonably be taken to represent remuneration for services provided by the worker to the client.

(3) A worker is treated as having a material interest in a company for the purposes of paragraph (2)(a) if–

(a) the worker, alone or with one or more associates of his, or

(b) an associate of the worker, with or without other such associates,

has a material interest in the company.

(4) For this purpose a material interest means–

(a) beneficial ownership of, or the ability to control, directly or through the medium of other companies or by any other indirect means, more than 5 per cent. of the ordinary share capital of the company; or

(b) possession of, or entitlement to acquire, rights entitling the holder to receive more than 5 per cent. of any distributions that may be made by the company; or

(c) where the company is a close company, possession of, or entitlement to acquire, rights that would in the event of the winding up of the company, or in any other circumstances, entitle the holder to receive more than 5 per cent. of the assets that would then be available for distribution among the participators.

In sub-paragraph (c) “close company" has the meaning given by sections 414 and 415 of the Taxes Act M2 , and “participator" has the meaning given by section 417(1) of that Act.

(5) Where the intermediary is a partnership the conditions are as follows.

(6) In relation to payments or benefits received or receivable by the worker as a member of the partnership, the conditions are–

(a) that the worker, alone or with one or more relatives, is entitled to 60 per cent. or more of the profits of the partnership; or

(b) that most of the profits of the partnership derive from the provision of services under the arrangements–

(i) to a single client, or

(ii) to a single client together with an associate or associates of that client; or

(c) that under the profit sharing arrangements the income of any of the partners is based on the amount of income generated by that partner by the provision of services under the arrangements.

In sub-paragraph (a) “relative" means [F2 spouse or civil partner], parent or remoter forebear, child or remoter issue, or brother or sister.

(7) In relation to payments or benefits received or receivable by the worker otherwise than as a member of the partnership, the conditions are that the payment or benefit–

(a) is received or receivable by the worker directly from the intermediary, and

(b) can reasonably be taken to represent remuneration for services provided by the worker to the client.

(8) Where the intermediary is an individual the conditions are that the payment or benefit–

(a) is received or receivable by the worker directly from the intermediary, and

(b) can reasonably be taken to represent remuneration for services provided by the worker to the client.

Textual Amendments

F1 Words in reg. 5(1)(b)(i) substituted (6.4.2004) by virtue of The Social Security (Contributions, Categorisation of Earners and Intermediaries) (Amendment) Regulations 2004 (S.I. 2004/770), regs. 1(1), 35(5)

F2 Words in reg. 5(6) substituted (5.12.2005) by Social Security Contributions (Intermediaries) (Amendment) Regulations 2005 (S.I. 2005/3131), regs. 1(2), 5

Marginal Citations

M1 Section 416 was amended by Part V of Schedule 17 to the Finance Act 1989.

M2 Section 414 was amended by section 104 of, and Part V of Schedule 17 to, the Finance Act 1989. Section 415 was amended by paragraph 6(2)(f) of Schedule 38 to the Finance Act 1996.